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Use of offshore company and Functions of offshore company

08/06/2016

Functions of offshore company

  1. General function – Tax exemption           

   2. Tax reduction function

  3. Limited function abroad

   4. Non-term profit reservation function abroad

1. General function – Tax exemption


Tax-exemption Company is invested by almost of individuals and companies in the foreign countries account for 90% of the existing offshore companies. For example, Taiwan company often complete all account books from Offshore company, then repatriate to combine with books of Taiwan company to exercise tax accounting or financial accounting. Generally, offshore company types established by us are called IBC or LLC, typically classical offshore companies are known by many people like B.V.I, Panama, Bahamas, Brunei, Belize, Hong Kong, Cayman Island. Taiwan enterprises often employ offshore company to invest, establish the workshops and offices in China, to tax protection area to establish commercial company, international commercial company, employing in three, four side - import-export model.

 2. Tax reduction function

Medium and large company or joint stock companies that have listed securities often employ such function. Because of involving in the great amount of money, however, it is obliged to disclosure books for investing in countries (including offshore companies). Only senior accountants or chiefs of accounting departments of large-scale companies may thoroughly understand structure and different matters of such function, help enterprise have more space of tax benefit. Because implementing books of majority of individuals and small and medium companies established abroad has many differences so that most of them use tax exemption function of offshore company to operate. For example, when Vietnamese enterprises use offshore company to invest in establishing workshops in China (or in Vietnam), selecting a nation with low tax rate (about 1-3%) as parent company or as a place providing invoices is really necessary for investors. The most typical nation among of such nations is Labuan island directly under Malaysia, Cyprus and Maderia (Portuga), because such places all have signed double taxation agreements DTT with China in order to enjoy preferential tax rates when repatriating profits to the local country, from 20% reducing to 10%, 5% or even 0%

3. Limited function abroad

If Vietnamese individuals or companies optionally sign memorandum of understanding in investment, workshop lease (offices, building), sales and purchase contracts or other agreements, then when there is any change in investment or individual interest is dramatically loss, such Vietnamese individuals and companies should completely bear proceedings responsibilities from foreign side. If contract is signed through an offshore company, it is not necessary to bear any particular economic responsibility, maybe bear loss of the company’s prestige to some extent. Or in the event where the adversary intentionally deceive, get round investor in the trap, at such time offshore company is properly an useful company that helps you escape from unforeseen tragic situation.

4. Non-term profit reservation function abroad

 Almost 100% of offshore companies registering at nations that allows to establish offshore companies all have a common that is to have right to reserve non-term profit abroad and major nations in the world all employ policy in tax non-collection in the respect of reserved profit accounts of the offshore companies at the same time. For example, formerly, Taiwan stipulated that if local companies want to reserve profit abroad should pay 10% of tax and companies under offshore shall be exempted from tax. From 2006 and later, after Taiwan has officially exercised the lowest tax responsibility regime, tax rate of 10% shall be employed to the company (from January 1st, 2006) and the tax rate of 20% shall be applied to the individuals (from January 1st, 2009). Therefore, investors should use from 2 offshore companies and more to invest in China (or Vietnam, etc) or other countries in order to reserve non-term profit abroad.

Use of offshore company

 1.Indirect investment, establishment of enterprise abroad

 7. Trademark, copyright, monopoly proprietary

 2.Three, four – side import and export commerce abroad      

 8. Brokerage fee and service fee collection from abroad 

 3. Establishing company, subsidiary, representative office in abroad

 9. Registering for Ships and planes own abroad        

 4. Securities listed abroad 

 10. Insurance procurement  abroad       

 5. Real estate proprietary abroad

 11. Opening account at any bank in the world

 6. Share procurement abroad

 12. Opening Debit, Credit cards

1. Indirect investment, establishment of enterprise abroad

Regarding foreign investor, indirectly establishing enterprises, representative offices and trading companies through offshore shall be enjoyed policy on tax reduction and tax exemption of offshore company, limited responsibility function in abroad and non-term profit reservation in abroad. 

2. Three, four –side import and export commerce abroad

 At present, majority of import and export trading companies use at least offshore company as a nominee company, releasing Invoice, Packing List to purchase goods from China or Vietnam and indirectly selling USA or Japan in order to strengthen price competitiveness in the international market, optimization of tax accounts.

3. Establishing company, subsidiary, representative office in abroad

Using offshore company without direct use of a parent company to establish branch/subsidiaries, representative offices abroad is truly an effective method to minimize all risk of investment. If there is any breakdown in foreign investment or its own benefit is dramatically loss, offshore company is the final buoy that helps you escape from danger.

4. Securities listed abroad

Establishing limited liability joint stock companies in Cayman or Beermuda, securities of such company are very easy to list. Offshore company of Labuan of Malaysia is the most preferential as consideration. Besides such countries, it is possible to list securities in NASDAQ of USA. 

5. Real estate proprietary abroad

Using offshore company to own real estate abroad for real estate transaction, just by offshore company ownership transfer, sale and purchase shall be completed, all the working just is to change representative owning offshore company, and all formalities are implemented abroad. For example, if using Taiwan individual or legal entity to own real estate abroad, when selling and purchasing, all notarized procedures, related tax shall be raised in turn, therefore, using offshore company to complete the real estate sale and purchase is truly the simplest and most economical solution but bring high security level.

6. Share procurement abroad

As same as real estate proprietary abroad, shares and bonds procurement abroad should not be present individual status during transaction, using offshore company not only show high security but enjoy tax exemption and avoid disclosure of sale, purchase and business documents of individual.

7. Trademark, copyright, monopoly proprietary

Beside profit tax exemption function of using offshore company to own trademarks, copyrights, monopoly, it is possible to avoid concerns in tax, not be affected by legal system of other countries; in other words it is able to register company in countries which sign double taxation agreements with many nations like Malaysia, employing double taxation function aims at benefiting from tax preference in profit repatriation. 

8 . Brokerage fee and service fee collection from abroad

At present, there are many kinds of consulting companies or art performance delegations/ artisans like Taiwan enterprise, if using offshore companies to sign service contract, sale and purchase contract or performance contract, profit is not only exempted from tax but double taxation exemption function in profit repatriation shall be employed for the highest profit.

9. Registering for Ships and planes own abroad

Ships owned by offshore company, its profit shall not have to pay tax, each ship as well as each offshore company registering here only has to pay a relatively cheap fixed charge, is allowable to circulate around the world without causing any politic troublesome to other countries.

10. Insurance procurement abroad

During business progress abroad, investor often meets cheap and convenient types of insurance that local insurance companies are impossible to supply. Bermuda and Cayman are extremely rare and cheap insurance service supplier and present globalization for international businessmen.

11. Opening account at any bank in the world

You can use your offshore company to open account at any prestige bank in the world with the highest security of information, professional service like internet banking, fax banking, voice banking, fully implement banking business like international transfer, foreign exchange purchase, open letter of credit, open banking endorsement, etc. (See bank account open section for detail).

12. Opening Debit, Credit cards

Using offshore company, you can open any card (Visa, Master card, JNB, AMEX, etc) undersigned the name of your company in order to use in any place accepted by the world without the undersigned of your name in the card and as matter of course all information of payment accounts by your card shall be secured at the highest level.

Some charts using function and use of offshore company established of us are presented in financial charts using offshore company.